Credit Card

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When used responsibly, credit cards can be rewarding

According to Experian, U.S. consumers had 497 million credit cards (source), which would be equal to approximately 1.51 credit cards per U.S. consumer.  Compared with other cultures, Americans use credit cards much more frequently (source):

  • Chinese may use credit cards for large purchases

  • Australians use credit cards for utility bills

  • Germans and French persons often prefer debit cards

Americans, on the other hand, use credit cards for both small and large purchases alike and have more credit cards than any other country (source). So why is that?  And what are the risks?


  • Understand how credit cards are different than debit cards

  • How are credit card rewards earned and what are they?

  • Risks of credit cards​

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Credit cards versus debit cards

Credit cards are quite different than debit cards.

Debit cards enable you to pull from the money that is already in your account (bank account, government benefit account, or prepaid card). For consumers who seek to avoid debt, this can be a big benefit -- you can't spend more than you have. In contrast to deducting money from your checking account, a credit card is like having a revolving personal loan that allows you to make purchases up to a certain amount, referred your credit card limit.

So what is the appeal of a credit card and why do Americans rely so heavily on them? Some of the key benefits relate to: liability protection, credit card rewards, and other perks.

Credit Card Reward Programs

Credit card companies often offer ​huge sign up bonuses and exciting rewards that may include points, cash back, gift cards, and other perks.

Consider, for example, how Chase Ultimate Rewards can be used. At the time of this writing, Chase Freedom Unlimited has a revolving rewards category such that you can earn up to 5% back in certain categories up to a limit, 3% in other, and 1.5% on all other purchases.

Perhaps the most simple process is cash back, which can be used as a statement credit or can be sent to your checking account. But sometimes, they can be worth much more when they are used for gift cards, used with travel partners, or for experiences.

As an example, if Chase Ultimate Rewards are transferred to an airline or hotel at a 1:1 ratio, it is often the case that airline or hotel points are worth more. This means that you may be able to find flights or hotels at a value that exceeds your cash back value. As an example, if a hypothetical airline's points are worth 2x the value of Chase Ultimate Reward points, you could choose to redeem 50,000 points for $500 or a $,1000 flight.

Keep in mind that points programs can change at any time, but being creative can sometimes lead to big benefits!

Credit Card Perks

In addition to points, credit card perks can come in other forms. Depending on your card, you may receive: lounge access at airports, discounted Uber rides, access to exclusive events, promotions with brands, or other benefits.

Some of the cards with the best perks have higher annual fee and require strong credit scores, which you may need to earn over time.

Liability Protection of Credit Cards

While both debit and credit cards offer certain protections if your card or credit card number is lost or stolen, the protection from credit cards is generally greater. In fact, Investopedia writes that:

"as long as the customer reports the loss or theft in a timely manner, their maximum liability for purchases made after the card disappeared is $50"  and that "The Fair Credit Billing Act allows credit card users to dispute unauthorized purchases or purchases of goods that are damaged or lost during shipping. But if the item was bought with a debit card, it cannot be reversed unless the merchant is willing to do so. What is more, debit card theft victims do not get their refund until an investigation has been completed"

Beyond this, many credit cards also offer identity theft protection, which can protect you against certain expenses and forms of liability if someone fraudulently presents themselves as you. Identity theft protection is important, as approximately 15% of people have experienced identity fraud at an average expense of $1,343 (source).

Risks of Credit Cards

While credit cards can be rewarding, they can also come with risks. In fact, approximately 37% of Americans have credit card debt (source), Perhaps the biggest downside of using a credit card is that everything you buy must be paid for.  And if it isn't paid for on time, the interest rates can be very, very high -- which depends in part on your credit score.

This means that debt that isn't paid off can build up quickly, which can be overwhelming.  If you use a credit card, make sure to do so responsibly.